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The Fiduciary Focus Blog

Improving Plan Operation, Cost, & Investment Structure: A 401(k) Case Study

A.J. Walker, AIF ® 07 December, 2016


The Challenge

This client had been using the services of an insurance company bundled retirement plan product for over ten years with no service or fee benchmarking over that time frame. The client was working with an investment broker for several years during this time. The investment broker had limited ERISA experience and only spent time meeting with participants. There was little to no formal fiduciary governance process in place.

he client initially engaged Guidance Point Retirement Services to conduct a comprehensive fiduciary review; our Starting Point service. The primary objectives of the assessment were to assess the reasonableness of fees incurred by the plan, the adequacy of their current service structure, review the plan investment menu, review internal plan operations, and support the plans fiduciary needs on an ongoing basis.

Client Profile

• One 401(k) plan

• 355 participants

• $20,000,000 in plan assets

The Process

Guidance Point conducted an assessment and benchmarking analysis to include a review of:

• Plan Fees

• Investment Performance

• Fiduciary Plan Governance

• Investment Policy Statement

• Plan Communication / Education

After examining the results of Guidance Point’s comprehensive 401(k) fiduciary review, the client was able to objectively evaluate the fees, services, and structure of the plan. Based on this analysis, it was determined that the fees being charged by the current vendor could be reduced dramatically with improved plan sponsor support and enhanced participant experience. In addition, it was determined that the plan offered a general account fixed income product with an artificially high crediting rate. Discussions with the insurance company revealed that the fixed income product was not sustainable and was being subsidized by the overall fee structure of the plan. Based on the results of the assessment, the client decided to hire Guidance Point to conduct a Request For Proposal process.

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Once the client's objectives for the vendor search were defined, Guidance Point drafted a formal Request for Proposal (RFP). Responses were solicited from a diverse, yet focused selection of high quality vendors from large institutional money management firms to small, independent record keepers. The result was a solution that significantly improved sponsor and participant service levels and decreased costs.

The Client's Results

At the conclusion of this process, the client had achieved all of their initial goals, including:

• $258,219 estimated reduction in plan operating costs over the course of 5 years.

• Implementation of annual fee benchmarking process to ensure fee appropriateness.

• Implementation of a comprehensive online education site dedicated to helping participants understand the concept of retirement readiness.

• Implementation of a custom education marketing campaign.

• Development of a program to focus on retirement readiness and adequate income replacement in retirement.

• Negotiation of a service agreement with measurable service goals and fees.

• Migration to online enrollment, loan processing, distribution processing, and beneficiary designation.

• Overall improvement in client service experience and enhanced partnership with record keeper/administrator.

In aggregate, these changes served to significantly improve the participant and plan sponsor experience, reduce plan costs, and enhance fiduciary best practices.  Make sense?  We hope this 401(k) Case Study  provides you   with an understanding of how our firm works with retirement plans to improve their function, process, cost and outcomes.  If you want to read more on this topic and work to improve some of these items yourself, feel free to download our free  Fiduciary Responsibility Guide eBook   from the button below.  

Download Here

You may also want to consider reviewing our blog post, The 3 Questions an ERISA Compliance Checklist Will Answer, for more information on improving 401(k) plan function and operations.


Topics: Fiduciary Governance Process, Corporations